4 banks to advise on Eurobond

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Kenya has picked four banks to manage on Eurobond sale planned for issue within the next two months, Bloomberg reported yesterday. The banks appointed to handle the issue sale include Citigroup, JPMorgan Chase, Standard Chartered Bank Plc and Standard Bank Group’s Kenyan unit, Stanbic.

The expected amount will be used to settle five-year Eurobond maturing in June 2019 and retire a $800 million (Sh82 billion at current exchange rate) syndicated loan taken in 2016. Kenya sold $2.75 billion (Sh280 billion) of Eurobonds in 2014 with $750 million (Sh76 billion) maturing in 2019 and $2 billion (Sh204 billion) falling due in 2024.

According to National Treasury 2018 Budget Policy Statement (BPS), Kenya wants to raise $3.2 billion (Sh320 billion) from external sources during the 2018/19 financial year that begins on July 1.

“The Government has already raised $750 million (Sh77 billion) commercially this financial year through a loan from a syndicate of lenders led by Trade & Development Bank,” the BPS says. Investment Analysts at Cytonn Investment Management Plc say the current declining yield (interest rate) of the $2.75 million Eurobonds issued in 2014 is a positive indicator for the country is ripe for another paper.

The decline in yield indicates that investors are willing to invest at lower rates, as they perceive less risk in relation to the bond. Risk can be in terms of default, or interest rate risks arising from changing macroeconomic conditions.

“When economic indicators such as inflation, interest rates, exchange rate, and economic growth are positive, investor sentiment is favourable and thus willingness to invest at lower rates of return (yield) is acceptable,” he says.

According to the Treasury, the Government will continue to diversify the sources of financial resources over the medium term by maintaining presence in the international capital markets.